Jan. 21, 2008 – ATV skid impacts Arctic Cat

January 21, 2008

Arctic Cat’s run of outperforming the industry in ATV retail sales, something the company says it has done for years, recently ended.
In reporting less than expected third-quarter revenue, the Minnesota manufacturer said its retail quad sales mirrored what the industry experienced, which is expected to be a fourth-quarter dip in the low double digits in terms of percentage.
In reaction to its decreased sales, Arctic Cat cut back its fourth-quarter production of ATVs by 10 percent, says CEO Christopher Twomey.
“After reporting seven consecutive years of record sales, we are disappointed with these results and the sluggish ATV environment,” Twomey said in a press release.
Partly because of the reduced ATV sales, Arctic Cat’s third-quarter revenue is expected to be in the $155 million-$160 million range. That could be a 32 percent drop from the previous year’s third-quarter performance, which was a record-setting $228 million.
The reduced sales announcement did come, however, with some positive news.
Twomey says the company has seen increased snowmobile retail sales in the early part of the season thanks to sufficient snowfall in key areas.
“This snow has got customers enthused about the sport,” he said in a conference call. “Snowmobile parts, garments and accessories also are doing well as people use their snowmobiles more this year compared to last year when we had little snow.”
Both snowmobile and ATV dealer inventory are expected to be better in the company’s upcoming fourth quarter than a year ago.
Twomey says the company’s sled inventory in December was 30 percent below last year’s levels, something that was expected as the company cutback on snowmobile production.
The company’s ATV inventory in December also was “well below” what it was last year, notes Twomey.
Arctic Cat also expects to sell more ATVs in its fourth quarter this year than last year, including its new big-bore models that have been well received by dealers.
Still, the company expects its full-year sales to be off more than $100 million, with a fiscal year-end revenue decrease of up to 17.5 percent a possibility.
Twomey did note the company “remains in a strong financial position, with no long-term debt.”
In the conference call, he also noted:

That Arctic Cat should see some impact from its European distribution efforts in its fourth quarter. The “European effort has not been great. It’s been OK,”?he said.

The company’s level of promotions for this fourth quarter will be similar to last year’s levels.